March U.S. light-vehicle sales finished below expectations, with cars again where most of the weakness exists, as year-over-year volumes have declined for three straight months.
Sales totaled 1.548 million units, 1.6% below year-ago’s 1.574 million units – 27 selling days both periods. First-quarter 2017 volume totaled 4.014 million units, 1.4%% below like-2016’s 4.072 million. Additionally, cars fell 11.5% in March from the same year-ago period, while trucks increased 5.6%.
March’s seasonally adjusted annual rate of 16.5 million units was slightly below same-month 2016’s 16.6 million and the lowest since 16.4 million in October 2014. The Q1 SAAR was 17.1 million units, vs. January-March 2016’s 17.2 million. (…)
There also are signs of softening in truck demand as well, with growth consolidating more into midsize, or 2-row, CUVs across the price spectrum. Three-row CUVs and minivans continued to slide, while Small Pickups declined for the first time since August 2014. Also, after being the fastest-growing segment in 2016, Small CUVs fell for the second-straight month.
The Large Pickup and Large SUV segments, where dealers have more room to dicker on price, continued to grow.
Also limiting volume were fleet deliveries, estimated down from year-ago for the second straight month, although retail deliveries did increase after two consecutive monthly declines.
The lower volume also means already bloated inventory will continue to loom large entering the second quarter. Automakers are slowing production for the U.S. market but planned output levels remain relatively strong, creating the prospect that at some point, probably over the summer, there will be an industrywide blowout sale to alleviate unwanted inventory before the industry heads into ’18 model year in October.
Dealers could be getting leery of high levels of new-vehicle inventory at the same time demand is slowing, especially with the likelihood of higher interest rates.
CalculatedRisk’s charts illustrate the recent slide and the continued apparent cyclical peak:
And the per capita chart from Doug Short:
Also possibly worrying dealers is the droves of off-lease vehicles returning to the market at a time when used-vehicle pricing is weakening. High inventory and lower prices on used vehicles usually are negatives for new-vehicle sales.
So far, used car prices have been holding up according to Manheim data:
Manheim Used Vehicle Value Index
Soft vs Hard data:
The value of construction put-in-place gained 0.8% during February (+3.0% y/y), after easing 0.4% in January and 0.2% during December. (…)
U.S. Factory Activity Continued to Expand in March U.S. factory activity decelerated slightly in March but continued to expand at a solid pace, signaling healthy momentum in the nation’s manufacturing sector.
The Institute for Supply Management on Monday said its index of factory activity fell to 57.2 in March from 57.7 in February, which had been the strongest reading since August 2014. (…)
- Of the 18 manufacturing industries, 17 reported growth in March.
- All 18 industries reported growth in new orders in March
Notice how the ISM PMI remains much higher and stronger than Markit’s:
At 53.3 in March, down from 54.2 in February, the seasonally adjusted Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) eased further from the 22-month peak recorded at the start of 2017 (55.0). The latest reading was the lowest since September 2016.
March data pointed to a further moderation in output growth from the peak seen at the start of 2017. The latest rise in production was the slowest for six months, but still much stronger than the soft patch seen in mid-2016. Survey respondents noted that the improving domestic economic backdrop and rising spending from energy sector clients had
helped to boost workloads in March.
New orders expanded at the slowest pace since October 2016, thereby signalling a sustained loss of momentum from the peak seen at the start of the year. Manufacturers cited greater caution among clients, alongside intense competition for new work and subdued export sales. March data pointed to only a marginal increase in new orders from abroad. (…)
Some firms commented on tighter inventory policies, which contributed to a near-stagnation in stocks of purchases in March. At the same time, postproduction inventories dropped for the first time since last September.
Meanwhile, suppliers’ delivery times lengthened to the greatest degree since February 2015, though weather-related transport disruptions exacerbated supplier delays.
Inflationary pressures picked up again in March, with manufacturers reporting rising prices for metals and chemicals in particular. Higher costs resulted in the strongest pace of output charge inflation since late-2014.
Another big difference between the ISM and Markit surveys:
Markit’s U.S. survey results are included in the JP Morgan Global Manufacturing PMI:
The global manufacturing sector continued to expand at a solid pace during March. Rates of increase in production and new orders were either at, or close to, February’s
recent highs, leading to further jobs growth. (…)
The expansion remained broad-based by product type, with PMI readings for the consumer, intermediate and investment goods sectors all signalling further solid growth. Intermediate goods registered the fastest rate of expansion and was the only category to see an acceleration compared to February. (…)
The increase in new business exerted pressure on capacity, leading to the steepest accumulation of backlogs of incomplete work for over three years. (…)
Price pressures remained elevated in March. Input cost inflation stayed well above the long-run series average, despite easing for the second straight month. Output
charges also increased at an above series average pace.
Meanwhile in DC:
(…) But all bets are off if the House plan for a border-adjusted tax, or BAT, is defeated and Congress begins looking for other ways to help finance tax cuts — which might draw any number of other companies into the fray.
“If you think the fight over BAT is ugly, just wait — because what comes next is going to be a much bigger food fight,” said Charles Gabriel, president of Capital Alpha Partners, a policy-research group in Washington. “We haven’t even begun.”
BTW, President Trump on Feb. 9th:
We’re going to be announcing something over the next week, I would say, two or three weeks that will be phenomenal in terms of tax.
Three weeks later, the S&P 500 was 100 points (+4.4%) higher…
The House won’t vote until this summer at the earliest on changes to the 2010 Dodd-Frank financial-overhaul law, a senior Republican said Monday, demonstrating how the path for regulatory relief remains in flux as lawmakers grapple with health-care policy, a tax overhaul and other issues.
Rep. Patrick McHenry (R., N.C.) said financial regulatory policy could make it to the House floor “when it is warm out…perhaps June, July would be my hope.” The vice chairman of the House Financial Services Committee and Republicans’ chief deputy whip in the House was speaking in an interview with WSJ Pro Financial Regulation.
“The whole year is shifted because we have taken longer on health care,” Mr. McHenry added, saying he and other Republicans need to get used to passing “imperfect” legislation that can actually become law. (…)